The latest fight between the homebuilding industry and unions is brewing in Sacramento over a bill that could require higher wages to workers on many residential projects.

Although authors of the legislation say it applies only to projects that use public money, the Building Industry Association is sounding the alarm on increased construction costs for private houses, condos and apartments.

Assembly Bill 199 was introduced in late January and authored by Kansen Chu (D-San Jose) and the California Building and Construction Trades Council, a labor union group. The bill requires workers to be paid “prevailing wage” on residential projects that have any agreement with “the state or a political subdivision” — a provision that extends the requirement beyond the redevelopment agencies, public agencies and low income housing projects covered under existing state law.

In an emailed statement, Chu said he only wanted to make sure workers get fair wages for projects using tax dollars.

“Our prevailing wage laws were established to provide equity, ensuring construction workers are compensated fairly on projects paid for fully or in-part by public money,” he wrote.

However, the San Diego Building Industry Association says AB 199 is purposely ambiguous and appears to be a play by the unions to extend prevailing wages to all residential development in the state, from a house with two bedrooms to a condo skyscraper.

AB 199’s first hearing in the state capitol is scheduled for March 15.

Higher pay from prevailing wage law has been credited with more efficient work, increasing the real income of many Californians and allowing the people that build residential units to afford them. But, the bill comes as California and other high-cost states have been falling behind on home production. Construction costs and contributing factors — like regulation — are being put under a microscope by many, even President Donald Trump.

John Gastaldo

Lorenzo Robbins and other Local 229 ironworkers build a rebar column near what will become a Garden Communities residential high-rise on La Jolla Village Drive.

Lorenzo Robbins and other Local 229 ironworkers build a rebar column near what will become a Garden Communities residential high-rise on La Jolla Village Drive. (John Gastaldo)

Most projects built with public funds in California require that workers get prevailing wage, which could be 30 percent higher than the pay of an average worker, said Alan Nevin, director of economic and market research at Xpera Group, a real estate analysis firm.

Although prevailing wage does not strictly mean union labor, rates are usually based on collective bargaining agreements, said the state Department of Industrial Relations. Nevin said union labor will account for roughly 25 percent of all the housing built in California this year.

Borre Winckel, chief executive of the local Building Industry Association, flew to Sacramento last week to discuss the bill with lawmakers because he interprets it to mean any housing project in the state would fall under prevailing wage requirements.

“We are going to aggressively campaign against its defeat,” he said. “We are gravely alarmed.”

Winckel argues that any building permit in the state is basically an agreement with a political subdivision. His association predicts pay the prevailing wage would add roughly $90,000 to the cost of building a 2,000-square-foot house in San Diego County.

Cesar Diaz, legislative and political director for the trades council, disagrees with the BIA’s interpretation. He said AB 199 aims to update existing law, which required projects that had agreements with now-defunct redevelopment agencies to pay prevailing wage.

He said the change in the law would apply only to projects where public funds were used, not going after someone putting a solar panel on a roof.

So, when would this new requirement apply?

If, for example, a 15-unit apartment complex developer needs to build a road to a project that didn’t previously exist — and it is getting reimbursed by a city or county for the construction — Diaz said that would trigger the prevailing wage requirement.

“It will have no impact on a residential unit or private construction out there,” he said. “These are only projects directly subsidized by taxpayers.”

California State Assembly

Kansen Chu (D-San Jose)

Kansen Chu (D-San Jose) (California State Assembly)

Attorney Tim Paone, an expert in land use entitlement and litigation, looked at the bill and said it would almost certainly increase the cost of housing for a variety of reasons, including fighting over what the law means in court.

“What is clear is there is an effort to move prevailing wages into many, many more projects than are subject to prevailing wages today,” said Paone, who has 40 years experience as a land use attorney in Orange County.

He said the current law is more straightforward because it requires prevailing wages on any project that has an agreement with a redevelopment agency, state agency or a public housing authority.

The major change with AB 199, Paone said, is the bill goes beyond those three agencies to any project that uses some sort of public funds — likely ensnaring thousands of projects for various reasons.

Nevin, of the Xpera Group, said the law would largely mean union labor will be needed for any housing project in the state and doubted the trades had enough workers to handle the expansion. Right now, high-rise construction uses mainly union labor while residential home building typically does not.

Diaz said there were plenty of skilled workers available for homebuilding because of its apprentice program, which has 74,441 apprentices spread throughout the state.

San Diego County had 76,500 people employed in the construction trades in January 2017, state officials said Friday.

John Gastaldo

Local 229 ironworkers work Friday on La Jolla Village Drive.

Local 229 ironworkers work Friday on La Jolla Village Drive. (John Gastaldo)

Jeff Platt, president of JAAM Electric in El Cajon, said it would be difficult for his business if he had to pay prevailing wages. His non-union shop employs 60 people who do work primarily for production home builders, such as KB Home, Shea Homes, Davidson Communities, DR Horton and Lennar Homes.

Platt said it’s not like JAAM is paying bad wages — roughly two to four times minimum wage — but prevailing wage and the administrative costs that go along with it would be difficult to absorb.

“It would be a significant change to my business,” he said. “You got to change who you are. People who have not done prevailing wage before might be intimidated and not go into the business.”

AB 199 has been referred to the Committee on Labor and Employment where it is scheduled to be heard March 15, and from there it can go to the full Assembly.

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